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shipper directly to the switching carrier, and that charge is as various as you can imagine. In different cities and in different locations within cities there is the

widest possible variation in switching charges. Senator MONRONEY. Would it be possible that the railroad would have an inherent advantage if it originated and delivered the entire load on its own lines without having to share this revenue, and perhaps getting only 50 percent in the one case, if the shipper deliberately routed it via a short line to join up with the long-haul railroad, and then taking it off the long-haul railroad for a few miles of shipping at the other end?

I think, if my memory serves me correctly, that the long-haul railroad would get only about half of that entire freight charge, while the two short hauls would get the other half. Would that come in this language of the inherent advantage that a railroad might have ?

Mr. INGERSOLL. I would think not. The business of divisions between railroads has been considered a matter of private contract, and the Commission only intervenes in the event there is a dispute which might impair the furnishing of service to the public.

Senator LAUSCHE. Mr. Chairman?
Senator SMATHERS. All right, Senator Lausche.

Senator LAUSCHE. While we are speaking of inherent advantage, would you put into that definition the advantage which the barge carriers have through the subsidies that they indirectly get when the Federal Government builds the locks and provides specific facilities for your use?

Mr. INGERSOLL. I think that the administration and the Commission have properly said that this is a separate question that should not be confused with rate regulation policy.

Senator LAUSCHE. But is it an inherent advantage that you have?

Mr. INGERSOLL. That is a question that could be debated. I would prefer not to try to answer that.

Senator LAUSCHE. Now, then, you wouldn't tolerate that inherent advantage being taken from you, would you, when the Commission acts ?

Mr. INGERSOLL. I don't understand the question, sir.

Senator LAUSCHE. Well, that is, if the Commission, in fixing your rate, would deprive you of the advantages that you have in selling a low rate through the benefits that you get from the Federal subsidy,

Mr. INGERSOLL. Of course, the Federal Government doesn't subsidize us. We don't get a dime from the Federal Government. The Federal Government chooses to improve waterways in different parts of the country, in different degrees, and chooses to improve harbors. And as a result of that, navigation takes place.

Senator LAUSCHE. I see.

Mr. INGERSOLL. There is the widest possible variety in the degree to which that navigation takes place, only because of the improvement.

Senator LAUSCHE. Let me put the question again: Do you consider you have an inherent advantage over the railroads through the indirect subsidies which I claim you get, but which you deny ?

Mr. INGERSOLL. I don't see how you can take that into account in viewing inherent advantage. I would say that inherent advantage lies with the carrier who would be preferred by shippers if rates reflected costs.

Senator LAUSCHE. Well, what if the Commission, in fixing the rate which it allowed you to charge, said that you have to include in that rate a part of the subsidies which you get indirectly; what would be your position ?

Mr. INGERSOLL. Of course, I would then say that we don't get any subsidies. Senator SMATHERS. All right, sir. Are there any other questions? (No response.)

Senator SMATHERS. Captain, thank you very much. We appreciate your testimony, it has been very helpful.

The committee will stand in recess until 2:15. (Whereupon, at 12:40 p. m., the committee recessed to 2:15 p. m.)

AFTERNOON SESSION

Senator SMATHERS. If the committee will come to order, the first witness this afternoon is Mr. Grant Arnold.

Mr. ARNOLD. Yes, sir, Mr. Chairman.
Senator SMATHERS. Nice to see you again.

STATEMENT OF GRANT ARNOLD, GENERAL TRAFFIC MANAGER,

E. J. LAVINO & Co., PHILADELPHIA, PA. Mr. ARNOLD. Mr. Chairman and gentlemen, my name is Grant Arnold, with A. J. Lavino & Co. at Philadelphia.

I appear this afternoon as president of the National Industrial Traffic League.

We appreciate this opportunity of getting another chance at bat, so to speak, in view of the extra innings afforded to the other interested groups on this subject.

On May 19 a letter was directed to you as to the shipper support of section 5 of S. 3778. That was done because we didn't know if we would have this opportunity. But if I might, sir, I would like to just briefly comment about the league's interest in this section.

As you perhaps knowSenator SMATHERS. You all are for this section, as is; is that right? Mr. ARNOLD. Yes, sir; very much so. Senator SMATHERS. Good. Mr. ARNOLD. As you know, the league is composed of shippers only. We have no carriers as members in the league. These members represent shippers of all types and sizes of every conceivable commercial and industrial activity throughout this country. And indirectly we represent many hundreds more because there are chambers of com-. merce represented on our membership, trade organizations, and so forth.

And it is these men, gentlemen, that pay the freight charges. These are the men that control the inbound raw materials, these are the men that are in charge of the distribution of the finished products.

Incidentally, there has been quite a revolution in distribution. Because of the competitive race for business today, industrial traffic men must look, must survey and study all the transportation services and costs. It is necessary in order to stay in business and to meet competition.

Perhaps more important, there is a new generation of traffic managers, many of them have not had an interest in any particular carrier—with any particular carrier; they are not anti this carrier or anti that carrier. They are objectively interested in the movement in the transportation of inbound and outbound goods.

Senator SMATHERS. You all ship with any type carrier, do you?

Mr. ARNOLD. Our membership, by every conveivable mode of transportation there is. We, in our company, use all forms of transportation. Therefore, carrier managements must have a freedom in making of rates if they are going to compete and handle this business.

Now, a maximum of freedom, of course, it goes without saying, consistent with a minimum of safeguards for the public interest. We don't believe in just a wholesale without any regulation. We recognize there must be a minimum of safeguards in the public interest. But we do feel that these carrier-managements of all forms of transportation, because all forms are needed, must have more freedom if they are going to get this business. Otherwise, we will have to frequently resort to private transportation, and that is the biggest competitor of the common carrier today.

Briefly, that is the reason why we support the principle of section 5 in S. 3778.

Now, if I might just make this one personal observation, sir:

Frankly, I can't understand the motor carrier opposition. In my duties, in day-to-day problems, I am perhaps more familiar with the competition existing between motor carriers and railroads rather than railroads and water carriers. To me, I think the motor carriers have a bright future. I think they are just beginning to tap some potential markets they have never handled before. And I, as a user, don't know any reason, when these common motor carriers start tapping these new potential markets, why they should be stymied by railroad rates and why I should be deprived of their inherent advantages. That is the case today. Frequently it is the case today.

So, therefore, I should think the motor carriers would be in agreement with this principle that would free them to exercise their discretion in making rates, so they could utilize the inherent advantages of the carriers they represent.

Senator SMATHERS. Do you have any fear that if this language became the law that you as a shipper would ultimately be deprived of the motor-carrier mode of transportation, that the railroads are going to gobble them up and become a great monopoly again? Do you see that in this legislation?

Mr. ARNOLD. I do not, sir, and I don't think shippers generally do, because as late as November of 1957, at our annual membership meeting, this question was considered, and we are giving you that opinion here today.

Senator SMATHERS. You are now expressing the opinion of the National Industrial Traffic League; is that what you are doing now?

Mr. ARNOLD. That is right, sir.
Senator SMATHERS. How many people does that represent?

Mr. ARNOLD. We have 1,700 members, but that is not our zone of influence. Because, as I pointed out before, there are many chambers of commerce, trade organizations, in the league. So they indirectlyand incidentally, I was with the Detroit Board of Commerce for 11

years, and I know how shippers, not members of the league, rely upon à chamber or a board of commerce to represent their transportation interests in the National Industrial Traffic League.

Senator SMATHERS. We are looking for a few people on this other side of the fense. [Laughter.]

Senator SMATHERS. We have had a lot on one side.
Mr. ARNOLD. May I make one other observation, sir?

I do not represent a large company by any means. E. J. Lavino probably would be classified as a medium-size, important, yes, but not a large one. And I certainly wouldn't be advocating anything here today if I didn't think that this principle was good for large, medium, and small industries alike.

Senator SMATHERS. All right, sir.
Are there any questions?
Senator Potter?

Senator POTTER. No. But I am delighted that Mr. Arnold has seen the light, being in Detroit for several years.

Mr. ARNOLD. Very enjoyable years. [Laughter.]
Senator SMATHERS. Senator Schoeppel ?
Senator SCHOEPPEL. I don't believe I have any remarks.

I appreciate these views, however, because they seemingly are at variance with what has been earnestly expressed here from other modes of transportation. This is a slant that we are happy to have before us when we reconsider this entire matter.

Mr. ARNOLD. I can't emphasize too much, sir, the need, the shippers' need, for the inherent advantages of every form of transportation. There is enough traffic for all forms, but we must have the inherent advantages from all.

Senator SMATHERS. All right, sir.
I wish there were more Senators here to hear you.
Thank you, Mr. Arnold.
Mr. ARNOLD. Thank you, sir.

Senator SMATHERS. What is your name, sir? We promised to let you testify.

Mr. Leighton?
Mr. LEIGHTON. Yes, sir.
Senator SMATHERS. Will you come up, please?

Mr. LEIGHTON. Leon Leighton, vice president, New York, Susquehanna & Western Railroad Co., Paterson, N. J.

Senator SMATHERS. All right, Mr. Leighton. STATEMENT OF LEON LEIGHTON, VICE PRESIDENT, NEW YORK,

SUSQUEHANNA & WESTERN RAILROAD CO., PATERSON, N. J.

Mr. LEIGHTON. Mr. Chairman and gentlemen, in view of the interest that was expressed by a number of Senators, both yesterday and this morning, in the question of semantics, and being thoroughly in sympathy with the purposes of the subcommittee's procedure,

I took the liberty of drafting a proposed bill which I think will effectively accomplish the purposes which you have in mind, and which would certainly meet the objections of the coastwise motor carriers in whose welfare we are very much interested.

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If I may, I will read the amendment first as a whole and then explain it very briefly.

Senator SMATHERS. All right.

Mr. LEIGHTON. I would propose that in lieu of the proposed section 15 (a), subdivision 3, that the following two sentences be added to section 15–1 of the act:

The Commission shall not approve any rate unless satisfied that such rate (a) is not made for the purpose of substantially lessening competition, or of creating a monopoly in any line of transportation or commerce, but is in harmony with the national transportation policy of the Congress, to recognize and preserve the inherent advantage of each form of transportation.

The first clause is copied almost verbatim from the Robinson-Patman Act, except for the insertion of the word "transportation."

The second clause is copied, of course, from the introduction to the Tnterstate Commerce Act.

(b) Conforms to the requirements of section 3, subdivision 1 and section 4, subdivision 1, and subdivision 2 of this act.

Section 3, subdivision 1, is the prohibition against discrimination and prejudice. Section 4, subdivision 1, is the prohibition against the short and long haul provision. Section 4, subdivision 2, is the provision that if a rate is depressed for the purpose of meeting water competition, it may not be restored unless it is shown that changed circumstances have resulted since the competition was eliminated.

Senator SMATHERS. What section was that?
Mr. LEIGHTON. Section 4, subdivision 2, sir.

(c) Conforms to the requirements of section 305, subdivision (c), and 307, subdivisions (d) and (f) of this act.

I have used the old nomenclature in title 49, United States Code, section 905, and so forth.

Section 305 is the one that provides the differences in rates and practices of a water carrier in respect of water transportation, from those in effect by a rail carrier with respect to rail transportation, shall not be deemed to constitute unjust discrimination or an unfair or destructive competitive practice.

Section 307 (d) authorizes the Commission, in the case of a through route, to prescribe such reasonable differentials as it may find to be justified between all-rail rates and the joint rates in connection with such common carrier by water; and section 307, subdivision (f), requires the Commission, in fixing rates, to consider the effect of rates upon the movement of traffic by the carriers for which the rates are prescribed, but emphasizes that the Commission must consider, in fixing rates, the need in the public interest of adequate and efficient water transportation at the lowest cost consistent with the furnishing of such service.

Then, finally, (d), is not lower than a reasonable minimum rate, taking the language that you gentlemen have, and is adequately compensatory to the railroads involved. And I will discuss that in a little more detail later.

The second sentence reads:

If any such rate conforms to the foregoing requirements, the Commission shall not disapprove the same for the purpose of holding the rates up to a particular level to preserve a rate structure of a competing mode of transportation.

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